Juggling Dynamite

Worthwhile macro update in this segment.

Danielle DiMartino Booth, former Fed insider and CEO of QI Research, warns that the US economy is deteriorating rapidly with rising unemployment and corporate bankruptcies despite stock markets reaching new highs. Here is a direct video link.

While Washington deflects attention with yet another government shutdown standoff, US economic data deteriorated further in September; see US Consumer Confidence Falls to Five-Month Low on Job Concerns.

The latest published U.S. Consumer Confidence (Conference Board) index came in at 94.2, down from 97.8 in August (on the lower left since August 2023).

The share of respondents claiming that economic conditions are “good” fell to a five-month low of 19.5% from 21.8%. The share expecting things to get “better” dropped to just 18.7% from 20.2% in August.

The “jobs are plentiful” index (upper right above) dropped to 26.9% from 30.2%; while the share saying “jobs are not plentiful” rose to 54.0% from 50.7% and is now the highest level since March 2021.

The share saying jobs were “hard to get” stayed at 19.1%, tied for a four-and-a-half-year high. The gap between this series and “jobs are plentiful” reached a level last seen in February 2021, when the unemployment rate was 6.2%.

The share believing that we will see “more jobs” ahead dipped to a three-month low of 16.1% from 17.9%. At the same time, higher income expectations dropped to 17.6% from 18.8% in August, tied for the lowest level in five months.

The University of Michigan’s consumer sentiment measure for September was 55.40 (down from 58.20 in August).

We also learned that the US private sector shed 32,o00 jobs in September, the most since March 2023, and a big miss from the +50,000 jobs that were expected. At the same time, August’s reading was revised to -3,000 from +50,000, as previously estimated (chart below, since December 2022). See, US Firms Shed 32,000 Jobs in ADP Report After Data Adjustment.

Industries such as leisure and hospitality, business services and financial activities, as well as goods-producing sectors like construction and manufacturing, all saw payroll reductions. Education and health services were one of the few areas to add headcount.
As Lance Roberts points out this morning, past similar 6-month contractions in core payrolls have corresponded with NBER-defined recessions, during which payrolls continued to decline.

Also, so much for tariffs being a boon for US manufacturing, this morning, we learned that US factory activity shrank in September for a seventh consecutive month. The Institute for Supply Management’s manufacturing index edged up 0.4 points to 49.1. Readings below 50 indicate contraction, and the measure has been stuck in a narrow range for the last three years (as shown below since September 2019).

In related news, it’s a weak ‘economy stupid’, research from the Yale University Budget Lab and the Brookings Institution think-tank indicates that, since OpenAI launched its popular chatbot in November 2022, generative AI has not had a more dramatic effect on employment than earlier technological breakthroughs (see chart below).

See, AI is not killing jobs, US study finds. But perhaps, we should add, “yet”:

The mass adoption of ChatGPT is yet to have a big disruptive impact on US jobs, contradicting claims by chief executives and tech bosses that artificial intelligence is already upending labour markets…

The lack of change in the occupational mix suggests the difficulties of finding work for those just out of college has little to do with technological change.

The Pandemic policy response saw a frenzied mix of debt forbearance, government handouts, policies aimed at increasing debt to stimulate home buying and speculation, mortgage rates under 2%, and an immigration surge concentrated in a few areas, especially around post-secondary schools.

Not surprisingly, as interest rates normalize, immigration slows, and the housing bubble deflates, all hell is breaking loose, especially in previous ‘hot’ zones.

My hometown, Barrie, Ontario, located one hour north of Toronto, is an example of the great unravelling now converging in the form of frozen real estate, falling home prices and rents, rising debt defaults, bankruptcies, a weak job market, homelessness making national news, and a college shuttering entire campuses.

See, Georgian College Closes Two Campuses and Decline in international students forces post-secondary job cuts; also, Barrie, ON declares state of emergency over homeless encampments and, Couple faces bankruptcy as Toronto condo market dives, as well as Why are home prices dropping so fast?

Similar problems are evident all over North America.

Where property prices and debt levels rose the most since 2019, affordability remains horrific, and strife is compounding.  It’s a cycle, folks. The more magnified the boom, the more magnified the bust.

John Pasalis, president Realosophy Realty and Steve Saretsky, realtor with Oakwyn Realty talk to Financial Post’s Larysa Harapyn about the state of Canada’s real estate market from coast to coast. Here is a direct video link.